Egypt to be stimulated by the UAE
The government’s second economic stimulus package will be financed through a $2.8bn (EGP 20bn) financial assistance from United Arab Emirates (UAE), and EGP 10bn in savings from the general budget thanks to the lower cost of domestic borrowing, Deputy Prime Minister and Minister of International Cooperation Ziad Bahaa El-Din said on Wednesday.
On 27 October, the government signed an agreement with UAE to finance development projects valued at $2.8bn as a part of the second package.The agreement took place during a three-day visit by Prime Minister Hazem El-Beblawi to Abu Dhabi in October to discuss means of expanding economic cooperation with the Emirati counterpart Mohamed bin Rashed Al-Maktoum.
Another $3bn was pledged to Egypt from the UAE following the removal of former president Mohamed Morsi from power in July. The UAE aid to Egypt is comprised of a $1bn grant and a $2bn interest-free deposit in the Central Bank. It also sent seven shipments of fuel worth $225m in July.The second stimulus package includes constructing 50,000 residential units, the completion of sewage projects in 151 villages, and building 100 new schools along with other projects, Bahaa El Din mentioned in a Wednesday press conference.
The interim cabinet adopted two stimulus packages. The first, announced in August, was valued at EGP 29.6bn and was aimed at fostering a 3% growth rate over the current fiscal year and reigning in the 13% budget deficit to 10%.The government’s plan involved adopting projects aimed at strengthening electricity grids, the completion of 17 road projects to link all governorates, the construction of 50,000 residential units, reclaiming 32,600 agriculture acres. It also entailed buying 600 buses for public transportation to work with natural gas, which would help decrease energy subsidies granted by the government.
Minister of Finance Ahmed Galal announced in November the adoption of a second stimulus package, the value of which he later estimated at EGP 30bn.In December Galal revealed that the government would make use of a $9bn deposit in the Central Bank of Egypt (CBE) from the Gulf, which had gone unused since 1991 as former president Hosni Mubarak had made himself the only one authorized to sign it off.
According to Bahaa El-Din, the government will also allocate EGP 10bn saved from reduced borrowing costs to meet the commitments of increasing the minimum wages.The government’s cost of borrowing fell as a result of cutting the interest rates by the CBE which Galal earlier described as representing “burdens on the government”. The CBE has cut interest rates three times by 50 basis points for each, which was seen by analysts a way to curb inflation.
In September, the cabinet decided to set a minimum income of EGP 1,200 for public workers. The Ministry of Finance said in January that 4.83m workers would benefit from the new minimum income, including about 1.55 million teachers and 46,400 medical personnel.
Bahaa El Din said the government would hold a conference in March or April to discuss the financial needs of the country and to issue long-term infrastructure projects.
The total value of loans and grants directed to Egypt in the first half of the current fiscal year amounted to $4.5bn, $2.8bn of which from the UAE, according to Bahaa El-Din.He added that officials from the European Bank for Reconstruction and Development’s (EBRD) had agreed to fund five projects throughout 2014 worth €251m in the sectors of electricity, energy, transportation, water and sewage.
Bahaa El Din met with EBRD’s Director of Southern and Eastern Mediterranean Operations Hildegard Gacek in October where they discussed a number of projects in various sectors and future cooperation portfolio between both parties.